The possibility of ideological bias in structural macroeconomic models
This paper studies the trade-offs that an expert with ideological biases faces in designing his model. I assume the perceived model must be autocoherent, in that its use by all agents delivers a self-concerming equilibrium. The exercise is carried in the context of a simplified AS-AD model, where in principle the expert can influence policy by manipulation six key parameters: the Keynesian multiplier, the interest elasticity of aggregate demand, the response of output to actual and expected inflation in the Phillips curve, and the variances of supply and demand shocks. Typically, a larger reported Keynesian multiplier is favored by more left-wing economists, as is a flatter inflation output trade-off. But an important aspect of the analysis is that autocoherence conditions imply constraints and trade-offs between parameters. For example a larger reported Keynesian multiplier must be associated with a lower interest elasticity of aggregate demand for the economists’s model to match the data. Also, some parameters or some combinations of parameters must be truthfully revealed for the expert to remain autocoherent. These are the parameters that are "identified" from the empirical moments of the distribution of observables. This illustrates the tight link between parameter identification and the scope for bias that is generated by the autocoherence conditions.
(This abstract was borrowed from another version of this item.)
|Date of creation:||08 Jun 2011|
|Contact details of provider:|| Postal: Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 Allée de Brienne, 31000 TOULOUSE|
Phone: +33 (0)5 61 12 85 89
Fax: + 33 (0)5 61 12 86 37
Web page: http://www.idei.fr/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ide:wpaper:24704. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.